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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 14731 / November 27, 1995
SECURITIES AND EXCHANGE COMMISSION v. WILLIAM J. RAUWERDINK,
United States District Court for the Southern District of New
York, Civil Action No. 95 Civ 9974 (HB).
The Securities and Exchange Commission (the "Commission")
brought an insider trading case today against William J.
Rauwerdink, the former Treasurer, Executive Vice President, and
Chief Financial Officer of MEDSTAT Group, Inc. ("Medstat"), in a
Complaint filed today in the United States District Court for the
Southern District of New York. The Commission's Complaint
alleges that Rauwerdink purchased Medstat common stock through
Medstat's 401(k) plan while in possession of material nonpublic
information about The Thomson Corporation's ("Thomson's") planned
tender offer for Medstat. The complaint seeks a permanent
injunction against future violations of sections 10(b) and 14(e)
of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3
thereunder, and an order requiring Rauwerdink to disgorge his
illegal trading profits of $109,284.50 plus prejudgment interest,
and a civil penalty pursuant to the Insider Trading Sanctions Act
of 1984. Simultaneously with the filing of the Complaint,
Rauwerdink, without admitting or denying any of the allegations
in the Complaint, consented to the entry of an order enjoining
him from violating Sections 10(b) and 14(e) of the Securities
Exchange Act of 1934, and Rules 10b-5 and 14e-3 thereunder, and
requiring him to disgorge his illegal trading profits and pay
prejudgment interest and a civil penalty of $109,284.50.
The Complaint alleges that by July 1994, a Thomson
subsidiary began discussing, among other things, a possible
acquisition of Medstat with Medstat senior management, including
Rauwerdink. Such discussions occurred at times throughout the
summer. On September 29, the CEO of a Thomson subsidiary met
Medstat's chairman and specifically proposed that Medstat
consider a Thomson tender offer. At a meeting on October 13 that
Rauwerdink attended, that same Thomson official expressed
Thomson's interest in acquiring Medstat and the parties discussed
a specific valuation range for the acquisition. Discussions
continued favorably, and on Wednesday, November 16, Thomson and
Medstat publicly announced the tender offer.
The Complaint alleges that in early 1994, Rauwerdink
participated in discussions with Medstat's general counsel
concerning how to minimize the risk that Medstat employees might
engage in insider trading through Medstat's 401(k) plan (the
"Plan"). As a result of these discussions, in May 1994, Medstat
updated its insider trading guidelines to warn all employees that
those guidelines, and the insider trading laws, applied to
purchases or sales of Medstat stock through the Plan.
According to the Complaint, on October 17, 1994, while in
possession of material nonpublic information regarding Thomson's
interest in acquiring Medstat and its intended price range for
the acquisition, Rauwerdink personally handed Medstat's Human
Resources Consultant a document dated September 30, 1994,
directing that half of approximately $295,000 that he was rolling
over from the profit sharing plan at his former employer be
invested in Medstat stock. On or about October 28, 1994, the
trustee for the profit sharing plan at Rauwerdink's former
employer issued a check for $294,599.36, representing all funds
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held for Rauwerdink, which check was mailed to Rauwerdink's home
address. According to the Complaint, on or about November 3,
1994, Rauwerdink personally handed the Human Resources Consultant
the $294,599.36 check and asked how quickly the funds would be
invested.
The Complaint further alleges that on November 4, 1994, the
Plan trustee bought 9,503 shares of Medstat stock for a total
price of $147,296.50, or $15.50 per share and, on November 7,
credited Rauwerdink's Plan account with those shares. On or
about December 21, 1994, the 9,503 Medstat shares in Rauwerdink's
Plan account were tendered to Thomson for the agreed tender offer
price of $27 per share. As a result of his insider trading
through the Plan, Rauwerdink realized illegal profits of
$109,284.50.
The Commission's investigation into trading in Medstat stock
is continuing. The Commission acknowledges the assistance of the
National Association of Securities Dealers in this investigation.